PLA Pre Action Protocol
PROPERTY LITIGATION ASSOCIATION
PRE-ACTION PROTOCOL FOR CLAIMS FOR DAMAGES
IN RELATION TO THE PHYSICAL STATE
OF COMMERCIAL PROPERTY AT THE TERMINATION OF
A TENANCY (THE "DILAPIDATIONS PROTOCOL")
Third Edition: 12 May 2008
1.0 Introduction
1.1 This protocol applies to commercial property situate in England
and Wales. There is a separate Pre-Action Protocol for Housing Disrepair
cases.
1.2 This protocol relates to claims for damages for
dilapidations against tenants at the termination of a tenancy. These
are generally referred to as terminal dilapidations claims.
1.3 It is not the purpose of this protocol to define
"dilapidations", "repair", "reinstatement"
or "redecoration". The work to the property that may be required
will depend on the contractual terms of the lease and any other licences
or other relevant documents. However, as a guide:
1.3.1 "dilapidations" might be said to be
a claim for all breaches of covenant or obligation relating to the physical
state of a demised property at the termination of the tenancy, and usually
includes items of repair, redecoration and reinstatement.
1.3.2 "repair" might be said to be a reference
to a state of disrepair in a property, wherethere is a legal liability
to remedy, or undertake, work to rectify it;
1.3.3 "reinstatement" might be said to be
a reference to returning a property to its former state prior to carrying
out works of alteration, where there is a legal liability to remedy,
or undertake, that work;
1.3.4 "redecoration" might be said to be
a reference to a state of general finish or appearance of the property
as required by the lease, where there is a legal liability to remedy,
or undertake, that work.
1.3.5 The tenant may also be required to carry out
other works for example, renewal, replacement and maintenance. This
is not an exhaustive list.
1.4 This protocol is not intended to be an exhaustive
or mandatory list of steps or procedures to be followed regardless of
the circumstances. Those will be determined by the facts of each case.
It is also not intended to be an explanation of the law. In deciding
the exact steps and procedures to be adopted regard should also be had
to the Overriding Objective as set out in CPR Part 1 and the Practice
Direction - Protocols.
1.5 This protocol is intended to improve the pre-action
communication between landlord and tenant by establishing a timetable
for the exchange of information relevant to a dispute and by setting
standards for the content of schedules and claims and, in
particular, the conduct of pre-action negotiations.
1.6 Compliance with the protocol should enable both
landlords and tenants to make an early informed judgment on the merits
of their cases. The aim is to increase the number of pre-action settlements.
If proceedings are commenced, the court will be
able to treat the standards set out in this protocol as the normal reasonable
approach to pre-action conduct when the court considers issues of costs
and other sanctions under the CPR. When doing so, the court should be
concerned with substantial
compliance and not minor departures, e.g. failure by a short period
to provide relevant information. In addition, minor departures should
not exempt the "innocent" party from following the protocol.
The court may also be invited to consider the effect of non-compliance
on the other party when deciding whether to impose sanctions.
1.7 In complying with this Protocol the landlord and
tenant and their professional advisers should have regard to the common
law principles of how loss should be calculated and in relation to repairing
covenants, s18(1) of the Landlord and Tenant Act 1927 ("s18(1)")
(Appendix A).
1.8 If the landlord or tenant does not seek professional
advice from a surveyor they should still, so far as possible, fully
comply with the terms of this Protocol.
1.9 Where more than one surveyor is instructed by either the landlord or the tenant, where appropriate, any endorsement required by this Protocol should be given by one or both of the surveyors as appropriate.
2. Overview of Protocol – General Aim
2.1 The objectives of this protocol are :-
(a) to encourage the exchange of early and full information
about the prospective legal claim;
(b) to enable parties to avoid litigation by agreeing a settlement of
the claim before the commencement of proceedings;
(c) to support the efficient management of proceedings where litigation
cannot be avoided.
2.2 A flow chart is attached at Annex B.
THE PROTOCOL
3. The Schedule
3.1 Generally, the landlord shall serve a schedule
in the form attached at Annex C. It shall (a) indicate the breaches
of the tenant's covenants or obligations which have not been remedied
at the termination of the tenancy, (b) state what in the opinion of
the landlord or its surveyor is necessary to put the property into the
physical state required by the terms of the lease and any licences or
other relevant documents, and (c) the landlord's costings (which may
be based on its estimate or on invoices if the
works have been done).
3.2 Breaches should be separated into relevant categories
eg repair, reinstatement, redecoration etc, and these should be listed
separately in the schedule and should (where appropriate) identify any
notices served by the landlord requiring reinstatement works to be undertaken.
3.3 The schedule shall be served within a reasonable
time. A "reasonable time" will vary from case to case but
generally will be not more than 56 days after the termination of the
tenancy.
3.4 The landlord may serve a schedule before the termination of the tenancy. However, if it does so it should confirm either at the termination of the tenancy that the situation remains as in its earlier schedule or serve a further schedule within a reasonable time.
3.5 If possible the schedule should also be provided
by way of computer disk or similar form to enable the tenant's comments
to be incorporated in the one document.
3.6 The schedule should include an endorsement by the surveyor preparing it. The surveyor's endorsement should confirm that in the opinion of the surveyor all the works set out in the schedule are reasonably required in order to put the premises into the physical state referred to in paragraph 3.1 above; that full account has been taken of the landlord's intentions for the property at or shortly after the termination of the tenancy; and that the costs, if any, quoted for such works are reasonable.
3.7 In giving this endorsement the surveyor should have regard to the
principles laid down in the Royal Institution of Chartered Surveyors'
Guidance Note on Dilapidations.
4. The Claim
4.1 The schedule should set out what the landlord considers to be the
breaches, the works required to be done to remedy those breaches and
the landlord's costings (see 3 above). The claim should set out and
substantiate the monetary sum the landlord
is claiming as damages in respect of those breaches. This will include
the items in the schedule and also any other items of loss it may wish
to claim (see 4.6 below). The claim should be limited to the landlord's
actual loss (see 4.8 below).
4.2 The claim should indicate clearly how it has been made up. The claim should be set out separately from the schedule but may be part of the same document.
4.3 If the claim is in a separate document from the schedule then this
should also be served within the timescale for service of the schedule
(see 3.3 above).
4.4 If the claim is based on the cost of works, it should be fully quantified
and substantiated. For example, each item of expenditure should, where
possible and/or relevant, be supported by either an invoice or detailed
estimate.
4.5 All aspects of the claim including the VAT status of the landlord,
if appropriate, should be set out.
4.6 If the claim includes any other losses for example,
(a) surveyor's fees for preparing the schedule; (b) professional or
other fees or expenses incurred or to be incurred in connection with
the carrying out of the remedial works (c) preliminaries; and (d) loss
of rent, service charge or insurance rent, these must be set out in
detail substantiated and fully quantified. The landlord should also
explain the legal basis for any such claim i.e. whether it is made as
part of the damages claim or under some express or implied provision
of the lease.
4.7 The claim should generally contain the following information:
• the landlord's full name and address;
• the tenant's full name and address;
• a clear summary of the facts on which the claim is based;
• the schedule referred to above;
• a clear summary of the monetary sums the landlord is claiming
as damages in respect of the breaches. This may include the cost of
the works, the consequential costs and fees, VAT, loss of rent and other
losses (including any sums paid to a superior landlord);
• any documents relied upon or required by this protocol, including
copies of any receipted invoices or other evidence of such costs and
losses;
• confirmation that the landlord and/or its professional advisers
will attend a meeting or meetings as proposed under section 7 below;
• a date (being a reasonable time) by which the tenant should
respond. In the usual case 56 days should be adopted as a reasonable
time.
4.8 Landlord's Loss
4.8.1 The landlord's claim should be restricted to its loss. This is not necessarily the same as the cost of works to remedy the breaches.
4.8.2 The claim should not include items of work that are not required
because they are likely to be superseded by works to be carried out
by the landlord at or shortly after the termination of the tenancy or
items likely to be superseded by the landlord's
intentions for the property at or shortly after the termination of the
tenancy (sometimes called "supercession")
4.8.3 In preparing the claim the person preparing it should have regard
to the principles laid down in the Royal Institution of Chartered Surveyors'
Guidance Note on Dilapidations (if a surveyor) and in any case to the
matters set out in paragraph 1.7
above.
4.8.5 A formal quantification of the landlord's loss based on either
a formal diminution valuation or an account of the actual expenditure
or a combination of both must be provided by the landlord to the tenant
prior to issuing proceedings. (See section 10
below.)
5. The Response
5.1 The tenant must respond to the claim within a reasonable time. In
the usual case 56 days should be adopted as a reasonable time.
5.2 The tenant should respond using the schedule provided by the landlord,
where appropriate, in sufficient detail to enable the landlord to understand
clearly the tenant's views on each item of claim.
5.3 The response should take account of what works, in the opinion of
the tenant's surveyor, are reasonably required for the tenant to comply
with its covenants or obligations, what amount is reasonably payable
for such works and what payment is
reasonable for the other amounts claimed. It should also take account
of what the tenant's surveyor believes to be the landlord's intentions
for the property at or shortly after the termination of the tenancy.
5.4 If the tenant's surveyor considers that any items in the claim are
likely to be superseded by works to be carried out by the landlord or
are likely to be superseded by the landlord's intentions for the property,
the surveyor should state this in the response and should give particulars
of that on which the surveyor relies e.g. correspondence or minutes
of the landlord company (see 6 below), and the surveyor should also
state the items in the landlord's claim to which this view is relevant.
6. Disclosure of Documents
Disclosure will generally be limited to the documents required to be
enclosed with the claim letter and the tenant's response. The parties
can agree that further disclosure may be given. If either or both of
the parties consider that further
disclosure should be given but there is disagreement about some aspect
of that process, they may be able to make an application for pre-action
disclosure under CPR Part 31.
7. Negotiations
7.1 The landlord and tenant and/or their respective
professional advisers are encouraged to meet before the tenant is required
to respond to the claim and must generally meet within 28 days of service
of the tenant's response. The meetings will be without
prejudice and preferably on site, to review the schedule to ensure that
the tenant understands fully all aspects of the landlord's claim and
the parties should seek to agree as many of the items in dispute as
possible.
7.2 In a complex matter it may be necessary for more than one site visit
or without prejudice meeting between the parties to take place. These
ought to be conducted without unnecessary delay.
8. Alternative Dispute Resolution
8.1 The parties should consider whether some form of alternative dispute
resolution procedure would be more suitable than litigation, and if
so, endeavour to agree which form to adopt. Both the landlord and tenant
may be required by the Court to
provide evidence that alternative means of resolving their dispute were
considered. The Courts take the view that litigation should be a last
resort, and that claims should not be issued prematurely when a settlement
is still actively being explored.
Parties are warned that if the protocol is not followed (including this
paragraph) then the Court must have regard to such conduct when determining
costs.
8.2 It is not practicable in this protocol to address in detail how
the parties might decide which method to adopt to resolve their particular
dispute. However, summarised below are some of the options for resolving
disputes without litigation:
• Discussion and negotiation.
• Early neutral evaluation by an independent third party (for
example, a lawyer experienced in that field or an individual experienced
in the subject matter of the claim).
• Mediation - a form of facilitated negotiation assisted by an
independent neutral party.
The Legal Services Commission has published a booklet
on "Alternatives to Court", CLS Direct Information Leaflet
23 (www.clsdirect.org.uk/legalhelp/leaflet23.jsp), which lists a number
of organisations that provide alternative dispute resolution
services. The RICS and PLA websites also list a number of experienced
mediators. It is expressly recognised that no party can or should be
forced to mediate or enter into any form of ADR.
9. Stocktake
Where a claim is not resolved when the protocol has been followed, the
parties might wish to carry out a "stocktake" of the issues
in dispute, and the evidence (including technical evidence) that the
court is likely to need to decide those issues,
before proceedings are started.
10. Formal Diminution Valuation and Quantification of the Claim
prior to Issue of Proceedings (NB See flowchart at Annex C)
10.1.1 Any technical evidence which might be presented to the Court
should be prepared in an appropriate manner by an appropriately qualified
Expert. Attention is drawn to Civil Procedure Rules rule 35.4(1) 'No
party may call an expert or put in evidence an expert's report without
the Court's permission. There is a Protocol for the Instruction of Experts
to give Evidence in Civil Claims which can be found at:
10.1.2 The landlord must quantify its loss by providing to the tenant
a detailed breakdown of the issues and consequential losses based on
either a formal diminution valuation or an account of the actual expenditure
or a combination of both. For these purposes
a formal diminution valuation is a valuation showing the diminution
in value to the landlord's reversionary interest in the property due
to the fact that the tenant has not complied with its covenants or obligations
relating to the physical state of the
property.
10.1.3 If a formal diminution valuation is produced it should be prepared
by a valuer. Only one valuation is required which takes account of both
s18(1) in relation to breaches of covenants or obligations to repair,
and common law principles of loss for other
covenants or obligations.
10.2.1 If the landlord has carried out the work it considers should
have been done to remedy the breaches of covenant or obligations, it
is not usually required to provide a formal diminution valuation but
may base the claim on an account of the actual
expenditure. However, the landlord should provide a formal diminution
valuation if in all the circumstances it would be reasonable to do so.
10.2.2 If the landlord has carried out some of the work but not all
of it, it is not usually required to provide a formal diminution valuation
in relation to the work which has been done but may base the claim for
those works on an account of the actual
expenditure. However, the landlord should provide a formal diminution
valuation if in all the circumstances it would be reasonable to do so.
With regard to the remaining works it should comply as in 10.2.3 or
10.2.4 below depending on whether or not it intends to carry out those
remaining works.
10.2.3 If the landlord has not carried out the work but intends to,
it must state when it intends to do the work, and what steps it has
taken towards getting the work done, e.g. preparing a specification
or bills of quantities or inviting tenders. The scope of
the landlord's proposed works should be clearly shown to enable any
effect on the dilapidations claim to be identified. The landlord should
provide a formal diminution valuation unless, in all the circumstances,
it would be reasonable not to.
10.2.4 If the landlord does not intend to carry out the work, then it
should provide a formal diminution valuation for comparison with the
schedule based claim in order to establish whether the claim is capped
by the valuation unless, in all the circumstances, it would be reasonable
not to.
10.3 If the tenant relies on a defence on the basis of diminution, it
must state its case for so doing and provide a diminution valuation
to the landlord. If a formal diminution valuation is produced only one
valuation is required which takes account of both
s18(1) in relation to breaches of covenants or obligations to repair,
and common law principles of loss for other covenants or obligations.
10.4 The tenant's diminution valuation shall be served within a reasonable time. A "reasonable time" will vary from case to case but generally will not be more than 56 days after the landlord has served his quantified claim under 10.1.2.
11. Court Proceedings
If the parties cannot reach a settlement after complying with the protocol
then the final step will be for the dispute to be referred to the Court.
Annex A
Section 18(1) of the Landlord and Tenant Act 1927
Provisions as to covenants to repair
Damages for a breach of a covenant or agreement to keep or put premises
in repair during the currency of a lease, or to leave or put premises
in repair at the termination of a lease, whether such covenant or agreement
is expressed or implied, and whether general or specific, shall in no
case exceed the amount (if any) by which the value of the reversion
(whether immediate
or not) in the premises is diminished owing to the breach of such covenant
or agreement as aforesaid; and in particular no damage shall be recovered
for a breach of any such covenant or agreement to leave or put premises
in repair at the termination of a lease, if it is shown that the premises,
in whatever state of repair they might be, would at or shortly after
the termination of the tenancy have been or be pulled down, or such
structural alterations made therein as would render valueless the repairs
covered by the covenant or agreement.
ANNEX B
Service of schedule
Service of Claim should normally be served within 56
days after the termination of the tenancy
Service of tenant's response (56 days from service of
claim)
Negotiations
Stocktake
Formal Diminution Valuation and Quantification of the
Claim prior to Issue of
Proceedings
Court Proceedings
NB:
1. The provisions of this Protocol should be adopted in respect of each
of the stages detailed in this flowchart.
2. The parties should consider throughout this process whether ADR would
assist in settling the dispute.
3. Service in this context means the issuing of the relevant document
to the tenant or landlord by the other party, its surveyor or solicitor
as appropriate, and should be in accordance with any provisions laid
down in the lease as to service.
Annex C
Schedule of Dilapidations
This schedule has been prepared by [name, individual
and firm], upon the instructions of [name the landlord]. It was prepared
following [name i.e. same name as above]'s inspection of the property
known as [property] on [date].
It records the works required to be done to the property in order that
they are put into the physical state the property should have been put
if the tenant [name] had complied with its covenants or obligations
contained within its lease of the property dated [ ].
The covenants or obligations of the said lease with which the tenant
should have complied
are as follows:-
[Set out clause number of the lease and quote the clause verbatim].
The following schedule contains:
• reference to the specific clause (quoted above) under which
the obligation arises,
• the breach complained of,
• the remedial works suggested by the landlord's surveyor [name
i.e. same name as
above] as suitable for remedying the breach complained of,
• the landlord's view on the cost of the works.
The schedule contains the true views of [name, i.e.
the same name as above] being the surveyor appointed/employed by the
landlord to prepare the schedule.
Upon receipt of this schedule the tenant should respond using this schedule
in the relevant column below to enable the landlord to understand clearly
the tenant's views on each item of claim.
1 |
2 |
3 |
4 |
5 |
Item No. |
Clause No. |
Breach complained of |
Remedial works required |
Landlord's costings |
DATED
[………………………………………………………..…]
SIGNED
[…………………………………………………………..]
[Name and address of surveyor appointed by landlord]
